CSLB Breaking News: Part of $150 Million San Diego Construction Project Stopped After Discovery Of Unlicensed Subcontractor

On Friday, April 11, 2014, the California Contractors State License Board issued a News Release confirming that drywall work on the “$150 million, 45-story Pinnacle Towers construction project in downtown San Diego has stopped after the [CSLB] determined the sub-contractor hired for the work, Clayton Wall & Ceiling Systems Inc. (Clayton), is not properly licensed in the state of California.” The News Release further confirmed that “[o]n April 4, 2014, investigators with CSLB, California Department of Industrial Relations (DIR), and the San Diego District Attorney’s Office, responded to an industry lead and performed an unannounced inspection of the construction site.” They “determined that drywall work began in January 2014, even though the company has not yet completed the licensing process.” The CSLB issued an administrative citation to Clayton for acting in the capacity of a contractor without a license and assessed a civil penalty of $15,000, as permitted by Cal. Bus. & Prof. Code § 7028.7. DIR’s Division of Labor Standards Enforcement (DLSE), also known as the Labor Commissioner’s Office, also cited Clayton for performing services without a valid state contractor license and assessed a $64,000 fine.

The News Release reported that the primary contractor, Pinnacle International Development Inc. (Pinnacle), contracted with Clayton on August 8, 2013 for the $6.34 million drywall job. Then, on December 3, 2013, Clayton applied for a California’s contractor’s license. “When it comes to contracting without a license the law is very clear,” said CSLB Registrar Steve Sands. “You cannot enter a contract to work, or actually do any work until you’re licensed. There’s no gray area here.” California law defines “contractor” broadly to include “any person who undertakes to or offers to undertake to, or purports to have the capacity to undertake to, or submits a bid to, or does himself or herself or by or through others, construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, parking facility, railroad, excavation or other structure, project, development or improvement, or to do any part thereof, including the erection of scaffolding or other structures or works in connection therewith …” It includes subcontractors and specialty contractors.

“An employer operating without a license creates an unfair advantage over businesses that follow the rules,” said DIR Director Christine Baker. “This case shows how the Labor Commissioner’s Office works effectively with other state agencies to enforce the law and protect workers and business in California.” Pinnacle may also face administrative action for contracting with a non-licensee.

The News Release further confirmed that Clayton’s license application will be on-hold until the fines are paid or until an appeal is heard. This will delay Clayton’s ability to work on the San Diego project, or any other project in the state. In addition, the Labor Commissioner’s investigation of the business will remain active.

Labor Commissioner Julie A. Su warned that “Scofflaws should know that state agencies are sharing information and finding violations that might have previously been overlooked.” “In challenging economic times it’s important to protect honest businesses from being put at a competitive disadvantage, and workers from being given less than their earned wage.” Su said.